"The trillion dollar mismatch in Treasury supply/demand dynamics over the next five years will likely trigger an equity-rate disconnect correction, in our view. Our analysis suggests either rates need to be 120bp higher or stocks need to be 30% lower to trigger enough demand to match forward UST supply estimates." - BofA

"Greece would survive, have new powerful friends, have bargaining chips that neither Europe nor America could ignore; China would have projected the use of the Yuan right in to Europe, and Russia would have more than a toe-hold for military power right inside NATO. If I was Tsipras or Varoufakis I would be on the phone right now."

Because the central government is ultimately responsible for guaranteeing local government debt, and because yields on the new muni bonds are so close to those on treasurys, the newly issued local government bonds are really just treasury bonds, meaning that, in essence, the supply of Chinese government bonds is set to jump by CNY2 trillion in the coming months. If all of the local government debt ends up being refinanced, the end result will be the equivalent on CNY20 trillion in additional treasury supply.

While China is rather proud of the fact that it hasn't yet implemented outright QE, Beijing has now put in place a bewildering hodge-podge of hastily construed easing measures that can't seem to get out of their own way.

The big news overnight was neither the Chinese manufacturing PMI miss nor the just as unpleasant (and important) German manufacturing and service PMI misses, but that speculation about a rate hike continues to grow louder despite the abysmal economic data lately, with the latest vote of support of a 25 bps rate increase coming from Goldman which overnight updated its "Fed staff model" and found surprisingly little slack in the economy suggesting that the recent push to blame reality for not complying with economist models (and hence the need for double seasonal adjustments) is gaining steam, and as we first suggested earlier this week, it may just happen that the Fed completely ignores recent data, and pushes on to tighten conditions, if only to rerun the great Trichet experiment of the summer of 2011 when the smallest of rate hikes resulted in a double dip recession.

What assures that the relentless low in TSY yields continues is that, courtesy of a market that is so broken and counterintuitive that for a record 6 years bad news is good news, and the worse the economy the higher stocks and bonds go, hedge funds will continue bidding up Treasurys, which they bought on hopes that this time the recovery will be right around the corner. And sure enough, as BofA reports overnight, hedge fund specs "sold 10-yr contracts increasing net short position to largest in three years. 10-yr contracts have now been sold in six of past seven weeks."

According to Goldman's own calculations, the demand squeeze for the High Quality Collateral that is global "Developed Market" Treasurys is about to go through the roof mostly thanks to central banks which will - even in the Fed's temporary hiatus from the monetization scene - soak up an unprecedented amount of Treasury collateral from both the primary issuance and secondary private market in their scramble to push global equity prices to unseen bubble levels and achieve the kind of Keynes-vindicating, demand-pull inflation that Russia was delighted to enjoy in the past several weeks.How much? The answer: a lot, as in a whopping 20% collapse in supply, once the ECB joins the fray!

Just like in April of last year, the simplest explanation why bond yields continue to defy conventional wisdom and decline is also the most accurate one. According to a revised calculation by JPM's Nikolaos Panigirtzoglou, the reason why investors simply can't get enough of Treasurys is about as simple as its gets: even with the Fed tapering its QE, which is expected to end in October, there is still much more demand than supply, $460 billion more! (And this doesn't even include the ravenous appetite of "Belgium".) This compares to JPM's October 2013 forecast that there would be $200 billion more supply than demand: a swing of more than $600 billion! One can see why everyone was flatfooted.

Just as it is easy being a weatherman in San Diego ("the weather will be... nice. Back to you"), so the same inductive analysis can be applied to another week of stocks in Bernanke's centrally planned market: "stocks will be... up." Sure enough, as we enter October's last week where the key events will be the conclusion of the S&P earnings season and the October FOMC announcement (not much prop bets on a surprise tapering announcement this time), overnight futures have experienced the latest off the gates, JPY momentum ignition driven melt up.